Friday, 14 November 2008
Europe could cede to emerging nations at IMF
European nations are prepared to lower their representation in international financial institutions to give China and other emerging economies a bigger role, the president of the European Commission, José Manuel Barroso, said ahead of the G20 meeting this weekend in Washington.
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Europe could cede to emerging nations at IMF
By Stephen Castle
13 November 2008
NICE: European nations are prepared to lower their representation in international financial institutions to give China and other emerging economies a bigger role, the president of the European Commission, José Manuel Barroso, said ahead of the G20 meeting this weekend in Washington.
No plan has yet been drawn up, Barroso said. But following last week’s European Union summit, Barroso said his clear impression was that European leaders accepted that they were over-represented in organizations like the International Monetary Fund.
“From the contacts I had,” said Barroso, “and the general spirit of the discussion from leaders and heads of state, there is an openness to accommodate an increased role of the emerging economies.”
The meeting on Saturday aims to start the reform of global financial institutions. It has been likened to the Bretton Woods conference that created the post-World War II international economic structures. One week ago the 27 EU leaders agreed to press for tighter regulation of financial institutions and an overhaul of the global system, and to seek a concrete proposals within 100 days.
Barroso and the President Nicolas Sarkozy of France, will meet President Dmitri Medvedev of Russia, in Nice on Friday before all three leave for the meeting.
Speaking during an interview with the International Herald Tribune, Barroso said that no decisions had been made about the IMF or World Bank, but that it had to be examined “sooner rather than later.”
China ought to have a greater say to reflect its economic power, Barroso argued.
He added that Europeans, despite their high representation, suffered from the fact that they spoke as national governments rather than as a group. “We are punching under our weight because we have a fragmented representation,” Barroso said.
Added together, the Europeans have higher voting rights at the IMF than the United States, Barroso said. “I don’t think you can say we have more influence,” he added.
At present the United States has 16.77 percent of the total voting weight at the IMF. Germany has 5.88 percent and Britain and France both have 4.86 percent. China has 3.66 percent.
As president of the European Commission, Barroso has an interest in promoting a pan-European representation at bodies like the IMF. Negotiating such an outcome among national governments that guard sovereignty jealously will be difficult, however.
Nevertheless experts argue that, if the big emerging economies are to be given a bigger say, Europeans will have to scale back their voting power.
“Clearly, the most over-represented part of the world right now is Europe,” said Nicolas Veron, research fellow for Bruegel, an economic research institute in Brussels.
Vernon added that there was a trade-off for Europeans who would have to weigh the costs of surrendering voting power against the potential benefits of being part of a more relevant institution.
However he added that the current crisis has so far not so far projected emerging economies to center stage.”The world that we are going to live in will be a world where China, India and Brazil have more importance than the Netherlands, Belgium and Denmark,” Veron said, “but right now the emerging economies have not been at the center of things either in terms of problems or solutions.”
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